WTI crude oil continues to trend higher as it bounced off the short-term rising trend line and might be on track towards climbing to the $88 per barrel mark.
The 100 SMA is above the 200 SMA to confirm that the uptrend is more likely to gain traction than to reverse, especially since the gap between the indicators is gradually widening.
However, stochastic is already in the overbought zone to signal exhaustion among buyers. Turning lower could bring bearish pressure back in and spur a pullback to the trend line support near $86 per barrel.
RSI is also starting to head south from the overbought zone, indicating that sellers are taking over while buyers take a break. A larger drop could find support at the 100 SMA dynamic inflection point at $84 per barrel or the 200 SMA at $82 per barrel.
Crude oil traders are likely waiting for the EIA inventory report before placing large bets on the commodity, as fundamentals are being driven by opposing forces.
On the one hand, Omicron concerns continue to keep a lid on risk-taking activity, weighing on higher-yielding assets like commodities. Also, reports that the energy crunch in some countries like China may be over are also sapping demand for WTI crude oil.
On the other hand, indications that the global economy is weathering this setback are keeping demand for crude oil afloat. Central bankers appear optimistic that business and consumer activity could pick up, which would mean increased consumption of fuel and energy commodities down the line.
Crude oil inventories fell by 4.6 million barrels in the previous EIA report, so another large draw could mean more upside for the commodity. Meanwhile, a small reduction or a surprise build could bring some downside in the near-term.
The commodity is also drawing support from news of a pipeline shutdown in Iraq and Turkey due to an explosion.